Claim time is not the time to find out the attorney has no malpractice coverage for the reported claim. Attorneys that do work for clients where the attorney is involved with client management or ownership may run afoul of attorney malpractice policy exclusions. As no two client relationships are the same and no two policies are alike, where an attorney is doing legal for clients with an ownership or management role it is wise to read the entire policy. Where one malpractice insurance policy may provide coverage, the same client relationship with another malpractice policy excludes coverage. Depending on the attorney’s attorney/client relationship(s) there may be no coverage provided by the attorney malpractice policy.
The Aspen American Insurance policy excludes certain client ownerships, management and/or directors/officer legal work from coverage.
IV. EXCLUSIONS
The Company will not defend or pay any claim:
D. Based on or arising out of the Insured’s capacity as an officer, director, partner, manager, trustee, or employee of any company, corporation, operation, organization, or association other than the Named Insured or any predecessor firm; provided, however, that this exclusion does not apply to services performed as a trustee where such services are performed in connection with, and incidental to, the Insured’s practice of law or while acting as a Non-Profit Director or Officer as defined in Section II., E. 5. of this policy;
E. Based on or arising out of professional services performed for or by any business enterprise not named in Item 1. of the Declarations if, on or after the date or time of the act or omission giving rise to such claim:
1. Any Insured controlled, owned, operated, or managed or intended to control, own, operate, or manage such entity; or
2. Any Insured was, or intended to become, an owner, partner, member, director, officer, or employee of such entity.
Control of or ownership in a business enterprise is established if the Insured, or the Insured’s spouse or domestic partner, own or hold, individually or collectively, directly or indirectly, 20% or more of the equity and/or debt instruments of such enterprise;
III. DEFINITIONS
H. Insured means:
1. The Named Insured;
2. Any predecessor firm;
3. Any past, present or future partner, incorporated partner, officer, director, stockholder, member, manager, associate, independent contractor, professional corporation, employee, or “of counsel” of the Named Insured, but only with respect to professional services performed on behalf of the Named Insured or any predecessor firm;
4. Any Insured’s spouse or domestic partner, but only with respect to any claim resulting from professional services performed on behalf of the Named Insured or any predecessor firm; or
5. The estate, heirs, executors, administrators, and legal representatives of any Insured in the event of the Insured’s death, incapacity or bankruptcy, but only with respect to professional services performed on behalf of the Named Insured prior to such Insured’s death, incapacity or bankruptcy.
I. Named Insured means the persons or entities specified in Item 1. of the Declarations or specifically designated by endorsement.
Affected insured attorneys should not solely rely on the information provided in this blog. As facts may differ, determining malpractice coverage for each attorney client relationship requires a complete review of the malpractice policy. The facts that cause an alleged malpractice claim could also impact coverage.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080